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Alice Oritz is the advertising manager for Value Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of

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Alice Oritz is the advertising manager for Value Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased display space that will add $24,000 in xed costs to the $171,000 currently spent. In addition, Alice is proposing that a 10% price decrease ($25 to $22.50) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $10 per pair of shoes. Management are impressed with Alice's ideas but are concerned about the effects that these changes will have on the break-even point and the margin of safety. Calculate the current break-even point in units, and compare it with the break-even point in units if Alice's ideas are used. Current break-even point units Break-even point if Alice's ideas are used units Calculate the margin of safety ratio for current operations and after Alice's changes are introduced. Current margin of safety ratio % Margin of safety ratio Alice's changes are introduced 96 Prepare CVP income statements for current operations and after Alice's changes are introduced. VALUE SHOE STORE CVP Income Statement Current New $ to V V $

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